Millions of pounds of taxpayers' money will be spent building two 11-storey apartment blocks in the city centre.

Stoke-on-Trent City Council and developer Genr8 have revealed that the towers will form the next phase of the controversial Smithfield scheme in Hanley.

Fortior Homes, the council's arm's length housing company, will pay for both blocks out of its £55 million capital investment pot.

All of the 277 'high quality' one and two-bedroom apartments will be for private rent.

While the council has yet to say how much the 'build to rent' scheme will cost, it follows the authority's £55 million investment in One and Two Smithfield, and the £4.55 million loan being provided for the forthcoming Hilton Garden Inn hotel.

But council leaders say the investment in the apartment blocks will yield a return in the form of rental income, extra council tax and the New Homes Bonus.

Director of housing Carl Brazier said the scheme would meet a demand for city centre properties and increase footfall in Hanley, as well as generate funds for the council.

He said: "Residential is an important part of Smithfield. If you look at other city centre regeneration schemes, they have that mix of office and residential.

"Cities like Manchester and Birmingham have that good quality rented accommodation for young professionals. But if you look around Stoke-on-Trent, we don't really have that here.

"This will generate income for the council that we will be able to spend on social care and children's services.

"As this will anchor the development the returns won't be as high as you'd expect from a similar scheme in Manchester. But the best time to invest in something like this is when the market is starting to rise."

An artist's impression of the plans for the Smithfield apartments in Hanley

Spaces in the Hinde Street car park on the other side of Potteries Way will be turned into private parking for the apartment blocks and hotel.

Despite the car park being heavily used already, Mr Brazier insists there are sufficient spaces elsewhere in the city centre.

Genr8 is currently consulting on the proposals, with a planning application due to be submitted next month.

If approved, the first 151-flat block, set to be built in front of Two Smithfield, could be ready for occupation by 2019. The second building of 126 apartments would then follow at a later date.

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The blocks will feature amenity space and communal gardens, along with ground-floor units such as a gym and shops.

Richard Ingham, partner at Manchester-based Genr8, said: "Build-to-rent schemes are becoming increasingly popular in city centres. These have a single owner and are designed specifically for people interested in long-term rent.

"As well as the apartments themselves, people will be buying into a lifestyle. The buildings will be fully concierged, with communal areas and a managed roof terrace.

"We've done a lot of work over the last 12 months, looking at the demand for this. We wouldn't be doing this if we didn't believe there was demand."

Genr8 will also be seeking outline planning permission for two new office blocks, which would be four to six storeys high.

Council leader Dave Conway, when he was in opposition, was against the authority spending millions of pounds on the first phase of Smithfield.

But he insisted that the investment in the apartment blocks would be different.

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Mr Conway said: "This is different because it's about filling a need. We're going to build the first one and see how that does, before we decide to go ahead with the second one. But we know there is demand for this out there.

"I want people to be proud of this city, and this development is about keeping the Stoke-on-Trent pound in Stoke-on-Trent."

Labour group leader Mohammed Pervez said he supported the principle of a high-quality residential scheme at Smithfield, but had concerns about how much it would cost the council.

He said: "City centre living was always a crucial part of the central business district. But I am a bit nervous about the financial details of this development. The council needs to be more transparent about that."

Dan Smart, a director at Hunters Estate Agent, believes there is a lot of demand in Stoke-on-Trent for 'high spec' city centre apartments.

He said: "There is a shortage of rental property like this in Stoke-on-Trent so there is a lot of demand. There are a couple of buildings in the middle of Newcastle, and there's the Lock 38 development, but there's nothing like this in the city centre area.

"Staff at bet365 and Vodafone would be looking for places like this – they could walk to work. So if the flats are done to a high spec they will go very quickly."

The public consultation on the plans will run until August 13. Members of the public can view the proposals in the reception area at One Smithfield, or by visiting www.smithfieldstoke.com/consultation